When World War I began in 1914, Japan occupied Tsingtao, German base,
of operations in the Orient. Intent upon domination of the Shantung Peninsula,
Japan presented the "Twenty-one Demands" to China. These included
Japanese succession to German rights in Shantung, extension to 99 years
of the leases in Kwantung Province with commercial freedom for Japanese
in Manchuria; half interest in the Hanyeh-ping Company which operated iron
and steel mills at Han-yang, iron mines at Ta-yeh and a colliery at Pingahan,
and a declaration that no part of China's coast should be leased or ceded
to any power. These demands upon China implanted in the Chinese people
a deeprooted hatred of all Japanese. Japan's acquiescence to Anglo-American
pressure at the Washington Conference in 1922 to respect China's sovereignty,
independence and territorial and administrative integrity, gave China confidence
that by following a foreign policy of "befriending the far and antagonizing
the near" she would recover her national sovereignty.

Anti-Japanese feeling was strong in China and an attitude of rejecting
or insulting all things Japanese permeated the Chinese people during the
transition from China to the Republic of China. These sentiments were exploited
wherever possible during the national unification movement.

At the same time, anti-Chinese feeling was growing in Japan. This was
directed against unwarranted infringement of Japanese legitimate rights
in China and Manchuria, which the Japanese believed had been gained at
the cost of blood during the Sino-Japanese and Russo-Japanese wars.

The Manchurian Incident began in 1931, followed in 1932 by the first
Shanghai Incident. Subsequently, Manchukuo was founded with

9

Japan de facto in complete control of the state. This caused deep distrust
of Japan by China and other powers. Therein lies one of the main causes
of the China Incident as well as of the Pacific War.

Japan; Germany and Italy, the "have-not" nations, discontented
with the status quo established by the Washington Conference, devoted themselves
to the task of rearmament, regarding the "have" nations, "Great
Britain, United States, France and the Soviet Union" as potential
enemies.

Traditionally the Japanese Army emphasized operations against the Soviet
Union, while the Navy considered the United States as the potential enemy.
Concurrently, the nation's finances could not meet the requirement's of
both the Army and Navy, and, as there was no unified program, year after
year, there was intense competition between the two services to see which
could acquire the greater part of the appropriations. Factors which contributed
to the advance of the military in politics and ended in their complete
control were the impotence and corruption of the political parties, the
apathy of the people and the inadequacies of measures taken by responsible
parties against the "behind the scene" activities of the military.

It was urgent that Japan should attain self-sufficiency in foodstuffs
and raw materials. Japan, however, was desperately short of resources,
while Manchukuo could supply only part of the requirements. To cope with
this situation, therefore, the Navy looked toward the resources of the
Southwest Pacific Area and advocated the southward advance of Japan's economic
sphere. On the other hand, the Army believed that Japan should make advances
into North China to the area bordering on Manchukuo, which had large reserves
of iron, coal, cotton, wool and salt. It seemed possible that the Army,
in complete disregard of the opinions of the Central Army and Navy Authorities
in Tokyo, would take action and advance into North China.

It appeared that Japanese nationalism had supplanted the anti-

10

Communist movement in Japan. This nationalism was intensified by the
May 15 Incident of 1932 when Premier Inukai was assassinated by military
reactionaries and again by the February 26 Incident of 1936, when Viscount
Saito and others were assassinated by young Army officers. In the political
sphere, the February 26 Incident was followed by the successive formation
of the Hirota, Hayashi and finally the Konoye Cabinet in June 1937. Though
inadequate in many ways, the Konoye Cabinet eliminated standing rivalries
and achieved a semblance of national unity.

With the establishment of Manchukuo in March 1932, Japan formally recognized
this new state and strove to promote its growth. At the same time, the
Manchurian question, as a result of Chinese agitation, became a major issue
in the League of Nations. On 24 February, 1933, the League of Nations adopted
a resolution calling for the non-recognition of Manchukuo and the United
States firmly upheld this resolution. As a result, Japan withdrew from
the League of Nations on 27 March 1933. Subsequently, the Western Powers
watched carefully and viewed with suspicion Japan's moves toward Manchukuo.
The Western Powers capitalized on the anti-Japanese feelings of the Chinese
people and adopted a policy of offering favors that would further their
influence with the Chinese people. The relations between Japan and the
Soviet Union over the question of Manchukuo were far from encouraging.
It was, therefore, to an internationally isolated Manchukuo that Japan
alone offered a helping hand.

Early in 1933, the Hitler regime came into power in Germany, and, in
October 1933, Germany also withdrew from the League of Nations. In this
way, a now trend developed in which the "have nots" drew closer
together. Eventually, at the end of 1936, the Japanese-German anti-Comintern
Pact and the Japanese-Italian Agreement were concluded, Japan thus drew
closer to an entered into friendly relations with the bloc of nations desirous
of breaking the status quo

11

in Europe.

In the meantime, in China the Nationalist Revolutionary Army under the
command of Chiang Kai-shek succeeded in its northern expedition in 1928
and the campaign to unify the whole of China progressed steadily. This
movement was further strengthened in December 1936 when General Chang Hsueh-liang
kidnapped Chiang Kai-shek at Sian in an effort to force him to declare
war on Japan. Even the Reds, whom Chiang had pursued since 1929, assisted
in effecting his release, strongly testifying to the moral unity of the
country. In January 1937 negotiations were conducted with the Communists
and the Shensi Government was brought into harmony with the Nanking Government.
Also the successful monetary reform conducted in 1935, under the direction
of Leith-Ross, together with the financial boom of the following year strengthened
Chinese economy, enabling that country to settle the Suitung issue advantageously
in December 1936. This, plus the augmented military power of China and
the support of Great Britain, the United States and the Soviet Union, intensified
the anti-Japanese movement and paved the way for the inevitable clash between
Japan and China.

In North China a situation had been created through maneuverings by
the local Japanese Army, influenced by Japanese military pressure in Manchuria,
by which the old influential elements in North China hoped to break away
from Kuomintang control. By the Umezu-Ho Ying-chin Agreement of 1936, the
influence of the Kuomintang was eliminated in North China. With the backing
of the Japanese Army, autonomy movements were started, culminating in the
establishment of the Chi-Tung Area Administrative Committee. The people
of China generally believed that these movements were instigated solely
by Japan, and the Special trade relations in the Chi TungDistrict
helped anti-Japanese feeling in that area. The situation grow tenser day
by day.

12

Outbreak
and Expansion of the China Incident

On the night of 7 July 1937, elements of the Japanese forces garrisoned
at Feng-Tai, southwest of Peiping, were suddenly subjected to firing by
the Chinese 29th Army, under the command of Sung Che-yuan, while they were
engaged in night exercises in the vicinity of the Marco Polo Bridge in
Peiping. This was the beginning of the Marco Polo Bridge Incident. There
was no evidence that this clash was planned by the Japanese forces or that
they desired to spread the conflict. Too, both the Japanese Central Government
authorities and diplomatic circles were desirous of localizing the affair.
The Chinese authorities, with the exception of some low ranking officers
and those directly concerned with the Incident, also appeared anxious to
prevent further clashes. It is believed that the mounting tension between
the two forces was the cause of the outbreak.

The Navy, at that time, was afraid that if the conflict spread, the
necessary help they would be required to give would impede their armament
program against the United States. They also felt that the conflict might
incite the British to assist the Chinese. The Army feared that the conflict
might force a change in the disposition of troops against the Soviet Forces,
while financial circles warned that was still, to a great extent, dependent
upon the United States and Great Britain.

Repeated negotiations were hold with the Chinese authorities, but the
Chinese were indecisive in their attitude, being conciliatory at one time
and obstinate at another and committing frequent acts of bad faith.

On 11 July, the Japanese Government decided to send to North China the
Jehol Brigade and a motorized unit from the Kwantung Army, together with
the 20th Division from Korea and the 5th, 6th and 10th Divisions from Japan
Proper. In the meantime, the Chinese authorities again changed their attitude
and a delegate from the Chinese

13

29th Army finally accepted and signed a settlement on the night of the
11th. The Japanese local authorities, therefore, regarded the Incident
as closed. However, the provisions of the agreement were violated on 19
July by Chinese troops in the vicinity of the Marco Polo Bridge. Pressed
by circumstances, both domestic and international, the Japanese Government
changed its attitude toward the Incident several times, but after the Lang-Fang
Incident on 25 July, followed by the Kwang-an-men the next day, it was
finally decided to dispatch divisions from the Homeland, On 28 July, the
Japanese Garrison Force in North China opened an offensive in the Peiping-Tientsin
area, concluding it on 31 July.

Progress of
the China Incident

The progress of the China Incident is described below in chronological
order. Short comments are made on those events which affected the Pacific
War as well as the over-all international situation at the time.

The Hirota Cabinet formulated a basic national policy on 15 August 1936
and reported it informally to the Emperor, (See Appendix 1) This basic
national policy and the corresponding foreign policy aimed at attaining
cooperation between Japan, China and Manchukuo through friendly relations.
The foreign policy based on friendship with all powers was not of such
a nature as to be the direct cause of the China Incident or the Pacific
War. However, two salient points of that policy are worth noting. One was
the tendency to approach Germany for the purpose of containing the Soviet
Union while the other was the design to establish an anti-Communist zone
in North China. The former developed very shortly into the anti-Comintern
Pact between Japan, Germany and, Italy and later into the Tripartite Alliance.
The latter, which aimed at creating an anti-Communist zone, by placing
North China under the Japanese sphere of influence, can be viewed as a
principal cause for the conflict in North China in 1937.

On 16 April 19379 the Hayashi Cabinet (Prime Minister Senjuro Hayashi,
Foreign Minister Naotake Sato, War Minister Hajime Sugiyama, Navy Minister
Mitsamasa Yonai, Finance Minister Toyotaro Yuki) decided to adopt the decisions
of the previous cabinet with some modifications in regard to the policy
to be followed in China for the time being. (See Appendix 2) There wore
two mayor principles in common with the previous cabinet in that they aimed
to protect North China from Communist domination through collaboration
and mutual assistance on the part of Japan, China and Manchukuo and desired
to create a pro-Japanese and pro-Manchukuo zone in North China.

Policies
of Central Army and Navy Authorities of
Japan at Outbreak of the China Incident

The China policy formulated by the Japanese Army authorities on 8 July
1937. (See Appendix 3)

16

The China policy formulated by the Japanese Navy authorities on 8 July
1937. (See Appendix 4)

The China policy of the Japanese Government as reported to and approved
by the Emperor on 11 July 1937, and the announcement by the Japanese Government.
(See Appendix 5)

As shown in the various appended documents, the Japanese central authorities
adopted a localization policy at the outbreak of the incident. However,
the government was forced to resort to practical measures for settling
the situation by sending reinforcements, in order to display its power
and maintain peace and order in North China. Such measures, however, were
misinterpreted throughout China as an act of aggression by the Japanese
Army against North China and finally led to disagreements and mutual distrust
in all subsequent negotiations.

Attitude
of Chinese Authorities at the Outbreak of the Conflict

Chiang Kai-shek expressed the strong determination of the Chinese to
defend their country in his statement at Lushan on 17 July, issued in connection
with the rejection by the Chinese Nationalist Government of the statement
made by the Japanese Government on 11 July 1937 as well as the Japanese
Government demand of 17 July. (See Appendix 6) Although Chiang appeared
to take a strong stand in his statement, the Nationalist Government showed
interest in Prime Minister Konoye's speech at the 71st Special Diet session
on 27 July when he said: "We have not relinquished hope for peaceful
settlement of the conflict in China," There appeared to be a movement
to place the party under the direction of Wang Ching-wei of the pro-Japanese
group and have him expedite a peaceful settlement.

On 28 July the United States and Great Britain made representations
to Foreign Minister Hirota stating that in consideration of their rights
and interests in the Peiping-Tientsin area, Japanese forces should be requested
to cease military action in that area.

17

They also stated that it was feared that the action of the Japanese
troops might bring about a conflict with the Chinese Kuomintung force.

In answer to these representations, the Foreign Minister explained the
circumstances that had led Japan to take such action. He further stated
that he could not promise to stop the Japanese military action. Germany
and Italy were generally conciliatory toward Japan.

On 29 July, Wang Ching-wei as President of the Chinese Nationalist Government's
Executive Yuan made a statement in which he categorically supported Chiang
Kai-shek's policy of resistance against Japan, emphasizing Japan's aggressive
attitude since the Manchurian Incident. He reiterated that the North China
Incident was a matter of vital importance to the very existence of the
Chinese nation and that the people should be prepared to make any necessary
sacrifice to resist aggression.

Diplomatic
negotiations between Japan and China

On 17 July 1937 the Japanese Government, on the basis of the decision
reached at the Council of Five Ministers, (comprising the Premier, Foreign
Minister, Finance Minister, Army Minister and Navy Minister) sent the following
instructions:

1. The Army attaché at Nanking was instructed to communicate
the following to the Minister of War of the Nationalist Government: In
the event that Chinese Government troops took action in violation of the
Umezu-Ho Ying-chin Agreement, the Japanese Government would take such measures
as it deemed necessary and the Chinese Government would be held responsible
for the consequences arising therefrom.

2. The Japanese ambassador in China was instructed to present the following
demands to the Ministry of Foreign Affairs of the Nationalist Government:

18

The Imperial Government, resolved to hold fast to the principle of preventing
the spread of the conflict as stated in the declaration of 11 July, herewith
makes the following demands in view of the subsequent attitude of the Nationalist
Government:

(1) Immediate cessation of all provocative words and actions.

(2) No hindrance of local authorities of either countries in their efforts
to settle the conflict.

A definite answer to the foregoing was requested not later than 19 July.
The Central Army authorities sent a directive to the Japanese garrison
force in China stating that since the Chinese authorities had not shown
evidence of fulfilling any undertaking in good faith, in order to ascertain
their good faith and thereby obtain a positive ground for future decisions
a time limit of 19 July would be placed on their making effective the items
then under negotiation. On the afternoon of 19 July, the Minister of Foreign
Affairs of the Nationalist Government sent an answer in the form of a memorandum
substantially rejecting the Japanese demands. The gist of the Chinese Government
memorandum was as follows:

The Chinese Government has been making every effort for the peaceful
solution of the incident under the principle of localization of the conflict.
Military action taken by the Chinese authorities is nothing other than
a preparatory step for self-defense to cope with the Japanese reinforcements
sent to the Peiping-Tientsin area. The Chinese Government, desiring to
prevent the spread of the conflict, makes the following two proposals to
the Japanese Government:

(1) A date will be fixed for simultaneous suspension of military action
and the armed forces of both countries will be withdrawn.

(2) Diplomatic negotiations will be continued in good faith for the
solution of the present incident. Although a local solution of the incident
is being attempted because of its essentially local character, any local
agreement must be submitted to the central governments concerned for sanction.
For the sake of peaceful solution of the incident, the Chinese Government
will accept any method of settlement based on international law or treaty.
It is also willing to have the case submitted to arbitration.

Thereupon, the Japanese Government severed diplomatic negotiations with
the Chinese Government and issued a statement to that

19

effect from the Foreign Office.

Although both the Japanese and Chinese governments tried to avoid full-scale
clashes in the hope of realizing an early peace, they missed the opportunity
of entering formal negotiations for peace. This was due in part to the
effort of the Chinese Nationalist Government to save face both domestically
and internationally by discrediting Japan's real intentions and in part
to the lack of unity within the Japanese Army caused mainly by the unyielding
attitude of radical elements.

With the completion of punitive operations against the 29th Army in
the Peiping-Tientsin sector early in August, behind-the-scene negotiations
were started, mainly under the sponsorship of Navy Minister Yonai, which
aimed at saving the situation by diplomatic measures. As days passed the
differences between the radical and moderate elements within the Army were
gradually lessened and a trend toward the resumption of formal diplomatic
negotiations became discernible. On the part of China, the Foreign Affairs
Department of the Nationalist Government made an announcement on 7 August
as follows:

There still is a possibility of peacefully settling the present conflict
between China and Japan, provided that the latter be ready to accept the
former's proposal for negotiations. So long as diplomatic relations between
the two countries have not been formally severed, negotiations could be
started soon. Now that the situation has become extremely tense, it is
imperative to give an immediate answer to the question of war or peace.
This, however, does not necessarily mean that it is too late to begin negotiations
for a peaceful settlement. It is believed that the present difficulties
will be surmounted only if leaders of the Japanese Government show statesmanship
supported by courage.

The time seemed to have at last arrived when there would be peace between
the two countries. Formal negotiations were about to be commenced. However,
the Oyama Incident in Shanghai caused the peace move to end in total failure.

20

Measures
taken by the Japanese Navy before the Shanghai Incident

1. Upon the outbreak of the Marco Polo Bridge Incident, the "Army-Navy
Agreement on the North China Operations, and the "Army-Navy Agreement
on the North China Air Operations" were reached on 11 July between
the Navy General Staff and Army General Staff. These agreements were immediately
put into effect. (See Appendix 7)

2. Informal plan for operations against China formulated by the Navy
General Staff on 12 July 1937. (See Appendix 8)

Actions mentioned in paragraphs (1) and (2) were based on the government
policy of localizing the conflict. However, the Navy, from its estimate
of the situation, foresaw a great possibility of the incident extending
to Central and South China and concluded that without sufficient preparation
in real power, it would be impossible to protect Japanese residents and
to safeguard Japanese rights and interests in China. (Some members of the
naval agencies stationed in China also expressed the opinion that it was
necessary to thoroughly punish the Chinese forces in the North China and
Shantung areas even at the cost of Japanese interests in Central and South
China and that if the situation was not dealt with firmly, China would
show even stronger anti-Japanese feeling and repeated clashes with Japan
would create an irretrievable situation. However, neither the government
nor the central military authorities made any positive move in line with
the idea of abandoning Japanese rights and interests in Central and South
China and taking definite action in North China.)

3. Evacuation of Japanese residents and preparations for operations
by the Navy.

With the final decision of the Army on 27 July to dispatch divisions
from Japan Proper, the Central Headquarters of the Navy formulated the
following policies and put them into practice immediately:

21

a. Principle

The Navy, though still holding fast to the policy of localizing the
incident, will make all necessary preparations for a full-scale operation
against China since there is a great possibility of the present tension
developing into full-scale hostilities between Japan and China.

b. Objective of operations

The immediate objective of operations will be limited to the solution
of the North China problem. For the attainment of this objective, the Navy
will promptly lend appropriate cooperation to the Army in the North China
area, engage in the escort of transport:, and safeguard Japanese interests
as well as residents in all parts of China. At the same time, the Navy
will complete necessary preparations for full-scale operations against
China and for the protection of Japanese residents in Tsingtao and Shanghai.

c. Operations end related matters

(1) Evacuation of Japanese residents in Central and South China will
be conducted with maximum caution to avoid provoking the Chinese authorities.

First stage: Evacuation of Japanese residents from the upper reaches
of the Yangtze River above Hankow.

Second stage: Japanese residents in other areas will make preparations
for evacuation and act according to circumstances.

(2) Issuance of orders for the organization of a special fleet to be
dispatched to China will be followed by the issuance of an Imperial General
Headquarters Navy Order concerning the fleet's action in executing its
missions.

(3) Orders will be issued for the first stage mobilization.

(4) Two battalions of the special naval landing units will be prepared
to advance to Port Arthur for dispatch to Tsingtao.

(5) Personnel and supplies will be ready to leave Furue aboard the transports
Kitakami and Sata for an air base on Taihoku.

d. The following war preparations will be expedited:

(1) Production of weapons, munitions (especially materials that cannot
be imported in wartime), bombs and machine gun bullets will be accelerated.

(2) Repair and maintenance of naval vessels and pre-

22

paration for requisitioning merchant vessels will be undertaken.

(3) Second stage mobilization will be prepared.

(4) Provision will be made for necessary facilities for the defense
of strategic sectors.

On 28 July after negotiations with the Foreign Ministry, the Navy decided
to evacuate all Japanese residents and the following telegram was dispatched
at 1510 hours, 28 July, by the Navy Vice Minister, Assistant Chief of the
Navy General Staff to the Commander in Chief of the Third Fleet. Information
copies were sent to the Naval Attaché, the Japanese Embassy in China
and to the officers resident in Nanking and Hankow.

Top Secret Telegram No 551.

On the morning of 28 July, the Tientsin Army launched a general offensive
against the Chinese 27th Army in the Peiping area. Anticipating that the
present conflict will develop into an all-out war between Japan and China,
we consider it necessary to withdraw immediately the Japanese residents
in the upper reaches of the Yangtze River above Hankow. It is requested
that you take the necessary measures to start their evacuation according
to circumstances in each sector, keeping close contact with the Foreign
Ministry local authorities concerned.

The Foreign Ministry had instructed consuls stationed on the upper reaches
of the Yangtze above Hankow to the effect that if the situation changed
for the worse, they would start to evacuate Japanese residents at their
own discretion.

Evacuation
of residents from the Yangtze River area

Japanese residents in the Yangtze River area were guarded by the forces
of Rear Admiral {Tanimoto} Umataro, Commander of the 11th Gunboat Division.
This division was composed of the flagship Yaeyama, Hozu,
Futami and Kotaka in Hankow, Katada, Sumida
and Kuri in Shanghai, Tsuga in Nanking, Hasu in Wuhu,
Atami in Kiukiang, Seta in Changsha, Toba in Ichang,
Hira in Chungking and detachment of 292 persons of the Shanghai
Special Naval Landing Unit in Hankow.

On 1 July, the residents totaled about 30,000, including Japanese, Koreans
and Formosans, of which 26,600 lived in Shanghai and

23

1,700 in Hankow. In view of increasing unrest throughout China and with
the expansion of the conflict in North China, the Navy General Staff issued
the following directive to the Third Fleet Commander in Chief on 28 July:

Inasmuch as the forces stationed in Tientsin started a general offensive
on the morning of 28 July, it is highly possible that the present conflict
will develop into an outright war between Japan and China. You are hereby
directed, therefore, to start, after due consultation with Foreign Office
agents the evacuation as circumstances require of Japanese residents living
along the stream above Hankow.

Evacuation of Japanese residents from the upper reaches of the Yangtze
was started on 1 August. On 4 August the approval of the Central Authorities
was received for their further evacuation. On 9 August, they reached Shanghai
on board Japanese ships.

In Hankow there was a divergence of opinion between the Consulate General
and the Navy concerning the evacuation, and the negotiation was finally
taken over by the Central Authorities. Permission for evacuation from Hankow
to Shanghai was issued on 6 August, and about 1,000 Japanese residents,
eager for evacuation, left for Shanghai on 7 August aboard Japanese ships.
Accompanied by a land combat unit detachment and escorted by ships of the
11th Gunboat Division, they completed their voyage safely. The residents
in Wuhu, Ta-yeh, Kiukiang and Nanking on the lower reaches of the Yangtze
River were evacuated also and reached Shanghai safely on 9 August. However,
the Gakuyo Maru, which had left Nanking on 13 August carrying diplomatic
personnel from the Hankow area and Army and Navy attaches, as well as a
small number of Japanese civilian residents from Nanking, was forced to
return to Nanking from the vicinity of Chiang-Yin, as the Chinese had closed
the river. They finally reached Tsingtao aboard a specially guarded train.
Japanese residents in Shanghai, in view of the increasing danger after
13 August, decided to repatriate women and children. Thus, about 20,000
of the total 30,000 residents were successively returned home around 19
August.

24

Evacuation
of Japanese residents in South China

The Japanese residents in South China were under the protection of the
5th Destroyer Squadron commanded by Rear Admiral Masakichi Okuma. The squadron
was composed of the Yubari (flagship), Asagao, the 16th Destroyer
Division (excluding Asagao) (Mawei), the 13th Destroyer Division
(excluding Sanae) (Swatow), and Sanae (Canton). The squadron
was assigned to protect about 12,000 Japanese residents in Fuchow, Amoy,
Swatow and Canton. With the outbreak of the North China Incident, the 16th
Destroyer Division was dispatched to the north. The 5th Destroyer Division
from Mako and the 29th Destroyer Division from Japan were in turn put under
the command of Rear Admiral Okuma.

Since the situation in South China showed a drastic change for the worse
on 12 August, the residents in Swatow started evacuation on that day. After
the clash in Shanghai, residents in Canton began evacuating on 15 August
and those in Fuchow on 17 August by order of the Foreign Minister. All
of them reached Formosa safely. The evacuation of residents from Amoy,
which had been delayed for various reasons, was completed in the latter
part of August when the Shanghai operation was at its height.

Navy Operations

With the government policy of dispatching troops to North China determined
on 27 July 1937, the Navy High Command issued the following orders:

Imperial General Headquarters, Navy Order No 1

28 July 1937

In obedience to the Imperial command, Prince Hiroyasu, Chief of the
Naval General Staff, herewith issues the following orders to Commander
in Chief Nagano of the Combined Fleet:

The Empire has decided to dispatch troops to North China for the purpose
of defeating the Chinese forces in the Peiping-Tientsin area and securing
public peace in key sectors of this area. Therefore, the Commander in Chief
of the Combined Fleet will have the Second Fleet cooperate with the Army
Expeditionary

25

Forces for the protection of the Japanese residents and to safeguard
Japanese rights and interests in the North China area. At the same time,
the Second Fleet will cooperate with the Third Fleet.

The Commander in Chief of the Combined Fleet will have the Second Fleet
protect the transportation of the Army Expeditionary Forces.

Directions on practical matters will be given by the Chief of the Naval
General Staff.

Imperial General Headquarters, Navy Order No 2

28 July 1937

In obedience to the Imperial Command, Prince Hiroyasu, Chief of the
Naval General Staff, herewith issues the following order to Commander in
Chief Hasegawa of the Third Fleet:

The Empire has decided to send troops to North China for the purpose
of defeating the Chinese forces in the Peiping-Tientsin area and securing
public peace in key sectors of that area. Therefore the Commander in Chief
of the Third Fleet is charged with the protection of the Japanese residents
in Central and South China and safeguarding Japanese rights and interests
in these areas.

Directions on practical matters will be given by the Chief of the Naval
General Staff.

Imperial General Headquarters, Navy Order No 3

28 July 1937

Prince Hiroyasu, Chief of the Naval General Staff, herewith gives the
following order to Commander in Chief Hasegawa of the Third Fleet:

The Commander in Chief of the Third Fleet will keep strict watch over
the Chinese coast south of Hai-Chou Bay (excluding the bay) and over the
Yangtze River area.

The Commander in Chief of the Third Fleet will dispatch the 10th Squadron
(excluding Izumo) to North China and put it under the command of
the Commander in Chief, Second Fleet.

Central standard time will be used.

On 28 July, at 2300, the Assistant Chief of Naval General Staff dispatched
the following telegram to the Commanders in Chief of the Combined, Second
and Third Fleets. Information copies were sent to all commandants of the
naval districts and minor naval districts and also to the Chief of the
Japanese Navy Office in Manchuria.

Imperial General Headquarters, Navy Section, Top Secret

26

Telegram No 1, regarding operations.

The Japanese Navy will escort the Army Expeditionary Force to North
China. It will, in cooperation with the Army, conduct operations in the
Tangku area and other areas; In order to keep strict watch over the possible
expansion of the conflict in North China. It will avoid provoking China
as long as possible, at least until the evacuation of the Japanese residents
along the Yangtze River is completed and the Special Landing Force Detachment
stationed at Hankow and all combat vessels in the Yangtze are concentrated
at Shanghai. With the exception of troops absolutely necessary for the
achievement of the immediate duties mentioned above, existing forces will
not be relocated or reinforced as long as there is no remarkable change
in the situation. Reinforcement units will be retained in the Kyushu area,
ready to be shipped out should the situation so require.

Special orders will be issued for the movement of the 1st and 2d Combined
Air Groups to advance their bases to Formosa, Quelpart Island and Chou-Shui-Tze
and for the advance of the 21st and 22d Air Groups to China.

Special orders will be issued for the advance of special landing units
to Tsingtao and Shanghai from their respective assembly points in Japan.

On 29 July, based on the above orders, Headquarters, Third Fleet, formed
its operational plans and issued the necessary orders to its subordinate
units. (See Appendix 9)

On the previous day, the Chief of Staff of the Third Fleet disseminated
the following statement to the whole Third Fleet regarding the critical
situation at that times:

I have received secret information that in Shanghai and its vicinity
Chinese forces have completed their preparations for immediate action and
are planning to take concerted action in every area at any moment. All
naval forces are requested to keep strict guard and maintain special prudence
until our preparations are completed.

On 29 July, the Commander in Chief of the Third Fleet dispatched Rear
Admiral Honda, Naval Attaché to the Japanese Embassy in China, to
Nanking on his behalf. He instructed him to inform Shao-Kuan Chen, Chief
of the Navy Department of the Republic of China and Hao-Sen, Deputy Chief
of the Military Affairs Department, that he would adhere to the localization
policy adopted by Japan. He further stated that it was a matter of great
regret that, due to anti-Japanese actions and the concentration of Chinese
troops in Central and South China that the incident wets threatening to
spread and it was requested

27

that some effective control be applied immediately, In the event the
situation deteriorated, the Third Fleet would be forced to take armed action.

The two Chinese department chiefs fully understood the situation and
promised to do everything possible to prevent the incident spreading to
Central and South China.

On the same day, the Commander in Chief of the Third Fleet announced
his policy in an attempt to avert clashes in these areas. The gist of his
announcement was:

Our Fleet, together with the Japanese residents in all parts of China,
will make every effort to check the occurrence of conflicts. At the same
time, we are keenly concerned with cooperative measures to be taken by
Chinese authorities and with the development of the present situation.
In the event that the measures taken by Chinese central and local authorities
are improper and the situation is aggravated beyond peaceful control, the
Third Fleet will take every measure considered necessary for the achievement
of its mission. We wish our fellow countrymen residing in China to be self-possessed
and prudent at this juncture. We also ardently hope that the Chinese authorities
concerned will exercise great precaution and exert every effort to prevent
the occurrence of any unhappy events in any part of China in order to maintain
friendship between Japan and China and to secure peace in the Orient.

At that time, the general situation in the Shanghai area was gradually
worsening, and propaganda to the effect that a victory had been gained
in North China by Chinese forces, together with many other groundless rumors,
was prevalent. The people were restless and the financial world showed
signs of aggravation. The Chinese forces made all necessary preparations
to cope with any positive actions by the Japanese Navy. Some of their first-class
airplanes were, ready for action on the Hung-Chiao Airfield, and some made
reconnoitering flights over the Chusan Archipelago.

Shanghai Incident

Situation on the
eve of the incident

As stated above, preparations for Central and South China operations
were intensified by the Japanese Navy in readiness to meet any possible
spread of the incident to Central and South China.

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Countering this, the Chinese, too, reinforced their strength in and
around Shanghai. In North China, the Chinese Air Force deployed some 60
aircraft to the north of the Lung-Hai railroad. In Central China, daily
flights were made by reconnaissance aircraft and the movement of Japanese
warships and naval vessels in the Shanghai and Saddle Islands area was
kept under observation. In addition about 40 Northrup and Martin aircraft
were concentrated at Kuei-Ten, Hung-Chiao Hsiao-Kan, and other bases. The
course of events was thus steadily building to a point of open clash between
the air forces of both sides.

The over-all sentiment against the Japanese took a turn for the worse
as evidenced by such moves as the conversations between Chiang Kai-shek
and Wang Ching-wei on 31 July and 1 August, the start of an all-out anti-Japanese
drive and the increasing number of Chinese notables evacuating from Shanghai,
These actions, as well as the attitude of the Chinese Air Force and the
Central Government forces, presaged a head-on clash between Japan and China.

At about 1830 on 9 August, Lt Isao Oyama, commander of the Western Detachment,
Shanghai Special Naval Landing Force together with Seaman 1st Class Saito,
the driver, were murdered by the Chinese Peace Preservation Corps while
riding in an official car on the road outside Hung-Chiao Airfield in the
western part of Shanghai. Diplomatic negotiations, as usual, made no progress.
The incident was used as an excuse by both sides, however, and a sharp
increase was made in the forces. Eventually this resulted in the clash
in Shanghai.

It was the consistent basic policy of the Japanese Government and the
Navy to seek localization of the issue and to refrain to the utmost from
acts which would incite the Chinese. However, such incidents as the all-out
clash between Japanese and Chinese forces in the North China area during
July and August, the complete evacuation

29

of Japanese residents from the Yangtze River basin, the concentration
of the 11th Gunboat Division in and around Shanghai and the Oyama Incident
as well as the reinforcement of both the 8th Cruiser Division and the 1st
Destroyer Squadron at Shanghai on 11 August and the landing of the Special
Landing Force, all combined to increase the tension between Japan and China.
With civilian transportation on both the Shanghai-Nanking and Shanghai-Hanchow-Ningpo
railroad lines banned on 11 August and Chinese regulars and armed Peace
Preservation Corps members massed in increasing numbers in and around Shanghai,
the situation was such that a single spark would touch off the explosion.

Eventually it happened. In Shanghai at 1030, 13 August, Chinese forces
occupying the Shanghai Commercial Press Building and the adjacent houses,
suddenly opened machine gun fire on Japanese positions near the Heng-Pang
bridge. Later, at 1654 on the same day, the Chinese forces in the Patsu-Ch'iao
area suddenly bombed and shelled the nearby bridge. The Japanese Special
Naval Landing Force retaliated.

The situation did not permit optimism as our landing force, having less
than 5,000 personnel, was faced with an enemy force of tens of thousands.

Prior to this, the Japanese Government had discussed a request from
the Navy that Army: troops be dispatched to Central China (The area below
the Yellow River, and along the Yangtze River). On 13 August, a decision
was reached at a Cabinet meeting to dispatch this force. An operational
directive was issued on the following day, 14 August, as an Imperial General
Headquarters Navy Order. (Appendix 10)

The Japanese Navy, therefore, decided to launch full scale operations,
discarding the existing policy of localizing incidents. The following statement
was issued on 14 August.

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The entirely unprovoked murder of Lt Oyama by the Chinese is clearly
attested through on-the-spot investigation made by both the Japanese and
Chinese commissions as well as by officers of the Municipal Council. The
Chinese have adopted a stand of lawlessly assaulting our force and the
state of affairs in the Shanghai area has suddenly grown critical. Nevertheless,
we have exercised extreme caution in consideration of the fact that Shanghai
is an international city where numerous foreigners reside. In evidence
thereof, our ambassador offered on 13 August to conciliate differences
with the ambassador of China. Under the circumstances we have limited our
actions to returning the Chinese illegal fire since the previous day. Moreover,
we have not attacked Chinese aircraft flying low within the settlement.
Nevertheless, at about 1000, 14 August, about 10 or more Chinese aircraft
dared to bombard our warships and vessels, Landing Force Headquarters,
Consulate General Office, and other installations. Words cannot describe
such acts of violence. To date, the Imperial Navy, having borne the unbearable,
is now compelled to take every possible and effective measure. Such a recourse
is regrettable in view of the hopes and desires we have held. However,
this is inevitable.

The Japanese Government realizing the need to take a firm stand made
an announcement on 15 August which was tantamount to a declaration of war.

War Preparations
by the Japanese Navy

After the outbreak of the Incident it was realized that the Nationalist
Government had formidable forces available for an all-out war against Japan.
The situation, therefore, called for immediate preparations on the part
of the Navy to ensure the successful outcome of the operation. Further,
in the event that operations should be extended over a long period, the
involvement of third powers had to be taken into consideration when planning.
In order to be able to deal with any such situation it was decided to establish
an agency similar to the Imperial General Headquarters Naval War Preparations
Research Division, which was later established during the Pacific War.
This agency was known as the War Preparations Research Committee and held
its first meeting on 23 August 1937. It was decided that in order to anticipate
the nation's needs should the China Operations be extended over a long
period, the necessary war preparations for prosecuting such operations
would be completed. In carrying out these preparations, stress was to be
placed on sea operations in order to cope with and repulse any possible
interference

31

by any third power.

Concrete plains were made to:

Accelerate the remodelling or reinforcement of warships
Accelerate warship construction
Complete war preparations to meet the requirements of wartime organization
Requisition necessary merchant ships
Remodel aircraft carriers
Accelerate the manufacture and equipment of aircraft
Maintain defense facilities
Maintain installations such as six bases, engineering facilities and signal
communication facilities
Mobilize men in the first and second reserves and train aeronautical personnel
Procure and maintain materiel for wartime organization forces

These plans aimed at the replenishment and promotion of naval armament
and war preparations to meet any emergencies which should arise by involvement
with third powers, in addition to meeting the basic requirements for the
China Operations. These preparations actually proved to be the beginning
of war preparations for the Pacific War.

Parallel with the above promotion of war preparations by the Navy, the
Army began to prepare for war. This caused tremendous friction between
the two services in regard to supervising munition factories as well as
in procuring supplies.

The sinking of the USS
Panay

On 12 December 1937, the day before the occupation of Nanking by the
Japanese forces, the United States river gunboat Panay was bombed
and sunk while she lay at anchor in the Yangtze River between Nanking and
Wuhu. The Panay was mistaken for a Chinese vessel by carrier-borne
fighters and bombers of the 2d Combined Air Group

32

(under the command of Rear Admiral Teizo Mitsunami) then cooperating
in the battle of Nanking, with its operational base at Shanghai. The Japanese
Government apologized to the United States for the mistake and the persons
concerned were punished. The tension between Japan and the United States
was eased and no serious consequence ensued. However, the frequent infringement
of vested British and American interests and mistaken bombings which occurred
during the subsequent years of the China Operations did much to increase
unfriendly relations between Japan and Great Britain and the United States.

Alsoon 12 December, HMS Ladybird and Cricket,
anchored upstream from Nanking, were attacked by Japanese naval planes.
Realizing in the middle of the attack that the ships were British, the
attack was halted before a direct hit was scored.